Brought to you by: Breez DeGuzman

As a parent, you know your children are not shy about asking for money. Some families give their children money when they ask, others give their children allowances. If you don’t currently give your children one, here are ten things to know about allowances.

Pros for giving your child an allowance:

* You may want to teach your children how to handle money; the earlier you start the better. By beginning to teach children about money at an early age, they’ll be more teachable and less likely to question your teaching.

* Having their own money will teach children to be responsible with their money. If they’re not, they face the unpopular consequences if they spend too much or lose it.

* Parents can breathe a sigh of relief because children won’t bother them for money if they have their own.

Cons of giving your child an allowance:

* Your children may think they can buy whatever they want because the money is theirs. This may mean they buy things their parents don’t approve of, which could result in stress parents may not want.

* Your children will probably complain that their allowance isn’t enough and ask you to raise it.

1. Why give an allowance? Having an allowance can be effective for teaching your children about money.

2. What can it teach? Allowances given to pre-teens and teens can be used to help finance their college career if they choose to go. By giving them an allowance, you give them the opportunity to open a saving account and checking account, both of which will be important when they leave home.

3. When to give it? A good time to start giving an allowance is when your children begin learning about money in school. Remember, if they can’t count it, they won’t know how much items cost and how much to use to pay for them.

4. How will it be used? You may not expect them to pay for school lunches, but you do want them to have the benefit of actually paying for some items with their own money.

5. What about saving? Explain that they will be expected to save a portion of their allowance. This teaches them the importance of saving, and expecting them to put something in savings first will help them learn this.

6. Will it be tied to chores? You will want to choose between linking your child’s allowance with doing household chores. That decision, obviously, is one you’ll want to make as a family.

7. How much do you give? You’ll want to consider your family’s financial situation, how much you can afford to give, and what your children generally ask you for money for. Some reports say the average allowance for 6-8 year olds is around $5 a week, $7 for children 9-11, and $15 for 12-17 year olds.

8. How often do you give it? Depending on how often you’re paid, you may not be able to give a weekly allowance. Also, as children get older, you may want to give them an allowance on a monthly basis so they learn to budget their money.

9. What else can they learn? When you give your child an allowance, you’re teaching them about spending wisely. It’s much easier for them to learn about losing $5 now rather than $500 when they’re older. An allowance gives your child a chance to make mistakes now when the stakes aren’t so serious.

10. What about docking their allowance? There may come a time when your child does something that makes you want to keep their allowance to teach them a lesson. If you choose to do this, don’t overuse this technique. It may cause resentment in your children.

Allowances and whether to give them is something each family will want to decide on their own. These ten things to know about allowances are by no means complete, but some things you may want to consider when deciding if they are right for your family.

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Parents and grandparents want the best for the children in their lives. With this in mind, some of them establish children’s trust funds – often days after a child is born. You may think wealthy families are the only ones who can establish children’s trust funds, but that’s simply not true.

What are children’s trust funds?

Children’s trust funds are similar to long-term savings accounts set up by parents or grandparents for the benefit of a child. It is a legal entity whereby one party, normally the parent or grandparent, sets aside a certain amount of money or property for the benefit of a minor child.

The property (money, stocks, bonds, or physical property) is held in trust by a trustee. The trustee is the person who looks after the property for the benefit of the child. This person may also be the grantor (the person who gave the money to the trust), but does not have to be.

There are two basic benefits of setting up a trust for a child:

1. The child is too young to manage the property. By setting up a trust for the property, the assets are protected for the beneficiary. The trustee will protect the assets until the child has reached the age set forth in the trust. Often children’s trust fund will set an age of 18 to 21 as the age at which a child may access the account.

2. The person setting up the trust is looking for tax savings. Income, estate, and gift tax advantages are common when establishing a trust for a child or grandchild. To understand the tax advantages of establishing a trust for your loved one, contact a professional tax advisor or financial consultant.

Once a children’s trust fund is established, the funds belong to the child. The person setting up the trust cannot reclaim the fund. Depending upon how the trust is set up, the child may be able to access some of the income or principal from the trust. Normally, however, trusts are set up to limit a minor’s access to the trust without getting approval from the trustee.

According to the Internal Revenue Service (IRS), there are two types of trust funds they will acknowledge. The first is the 2503 which allows the use of the funds until the child reaches 21, at which point the money is disbursed and the child may choose to reinvest or spend as they see fit. The second is the 2503b which distributes money to the child each year. If the child is too young, the money may be set aside in an account until the child is old enough to be given the money.

Choosing to establish a children’s trust fund is a serious matter. You’ll want to think about who should be the trustee, what requirements are going to be set in place, when or if the child will be able to access the funds while a minor, and more. To better understand children’s trust funds, speak with a lawyer and financial consultant. They will be able to give you the best advice for establishing the trust for your child or grandchild

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Economic circumstances can change rapidly for families and individuals. To help prepare for this reality, you can begin teaching children about money and financial responsibility while they’re young.

You may think your children are too young to learn about money, but unless they’re preschoolers or younger, this isn’t the case. In fact, the earlier you can start teaching children about money, the better off they will be because they’ll have practical knowledge and can learn to handle money wisely now.

The following seven benefits of opening a traditional bank account for children may encourage you to start the process.

1. Teaches them about money – Opening a traditional bank account will allow children to learn basic accounting principles. Let them be responsible for keeping their own account register. This may also teach them that everything costs something – in money and in time.

2. Prepares them for the future – Giving children a weekly allowance will prepare them for being paid as an adult and is a tangible way to teach them about money management. Teach them how long they’d have to “work” to purchase an item; those $100 shoes they want would cost 10 hours of labor to pay for if they make $10 per hour. Ask them if the shoes are truly worth that much time and effort.

3. Teaches them about saving – Having your children put money aside from their allowance teaches them to save. This teaches responsibility with money, budgeting by saving for something they want, and patience to wait until they have all of the money to buy that item.

4. Teens can learn to do their own banking – This is especially important if your teen does odd jobs to earn money or is working a part-time job. Having their own bank account enables them to keep track of their money and will teach them to be responsible and put money aside rather than spending it all.

5. Teaches them to save for the future – If your child is interested in going to college, having a bank account gives them a place to put money aside. Having a savings account is also a good option if they want to purchase a car. By having the account now, it will teach them to save for big ticket items they’ll want or need.

6. Savings accounts for minors are tax free – Start the account in your child’s name and with their social security number and you won’t be responsible for taxes on any interest the account earns. If your children receive cash gifts from family or friends, they can add to the account at any time. Of course, if your children are minors, an adult will have to be on the account as well.

7. Allows them to see where family money is spent – Setting up a traditional bank account for your child will enable them to see the process of earning an income and can teach them how you choose to spend that income. You may even want to consider getting your children’s input when you have discretionary funds.

One of your goals as a parent may be to teach your children to be financially responsible. Helping them open a bank account is a great start to teaching them about money and how to use it wisely.

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Parents hope for their children’s lives to be better than their own. They want to ensure their children have opportunities they may not have had. One way parents can help prepare for their children’s future is by opening a children’s savings account (CSA). But what are children’s savings accounts and how can they benefit your child?

One benefit is to help your child’s savings for Education. Upromise was founded with a single mission in mind — to help families achieve the goal of a college education for the children they love. Upromise provides the programs, products, and information parents need to help them reach their college-savings goals and it’s free to sign up.  I personally use this program for my son’s future education and it is awesome.

College educations cost anywhere from $30,000 and more for a Bachelor of Arts degree depending upon the course taken. With expenditures this high, beginning to save as soon as possible is a wise financial move. In the past, the Education Individual Retirement Account (Educational IRA) was limited to having $500 added to the account each year. When the accounts were renamed in 2001 to the Coverdell Education Savings Account, the contribution limit was raised to $2,000 per year.

Any parent, grandparent, or other adult can set up the Coverdell Education Savings Account and designate a child seventeen or younger as the beneficiary. Contributions are added each year. These contributions are not tax-deductible; however, as long as withdrawals are made to pay eligible school charges (tuition, books, etc.) they can be withdrawn without being taxed.

What are some of the other benefits of starting a children’s savings account for a child you know? Here are a few of them:

* You can add money to the CSA and receive credit for doing so up to the date you file income taxes in April.

* Instead of having a cut off of the child’s eighteenth birthday, contributions for children with special needs can be made past their eighteenth birthday.

* Any adult can add money to a child’s account as long as the total contributions for the year do not exceed $2,000. If money over $2,000 is placed into the account, there is a six percent excess contribution tax charged even if the funds come from different people.

* You can start a Coverdell account and a state-sponsored college tuition program account for the same child.

* Coverdell and other children’s savings accounts can be opened at any financial institution that offers IRA accounts. The contributions can also be made in any of the following – stocks, bonds, mutual funds, and certificates of deposit – as long as the contribution does not exceed $2,000 per year.

To learn more about the financial benefits of starting this type of children’s savings account, talk with a financial counselor. They will be able to give you more information and answer any questions you might have.

A college education is a dream many parents have for their children. However, the cost of that education is exorbitant for many families. It’s possible to begin to save now for their education as long as they are younger than seventeen. Learn all you can about what children’s savings accounts are and how saving now can help your child with their educational future.